Planning for mum's finances

[want2go]

Dear all

Here to seek some ideas or opinions for mum's financial planning. She's turning 50 soon and not working anymore. She would like to have a stream of income to supplement her living expenses (I am her sole provider).
Mum has been renting out her 20yr old 4bedroom HDB flat for couple of years (she lives with me).
The rental money served as extra pocket money for her.
I have been hearing about HDB flat depreciating in value rapidly after 30 years.
Is it a good idea to sell the 20 year old flat now and reinvest the proceeds?
My mum current situation
- 60k in CPF ordinary account (200k used for flat mortgage incl accrued interest)
- 50k cash savings
- conservative estimated selling price is 350k
I have explored the following:

1. Invest in a 1 bedroom condo
Assuming that it is positively gear and has money into the pocket after paying mortgage and other expenses; sell when there's a profit and repeat the process.
Heard from many that it's hard to make money from property nowadays.

2. Invest cash proceed from HDB sales into an annuity that pays a monthly income.
Put CPF money into trust that earns higher interest.

For 2, I am not exactly very financially savvy and would be very hard to choose the fund to invest- none of them are principal guaranteed. If they are, the return is usually poor.

Thanks for your time and hope to hear your ideas.

 

[JuniorLion]

How much can you borrow from bank with these conditions:
1) 50 years old
2) No income

You think?

 

[qhong61]

Don't sell. Would she be able to stay with ur wife in future?

 

[BBCWatcher]

We don’t have sufficient information. What are her other assets, such as her MediSave and Special Account balances? Does she plan to resume paid employment? (Asked a bit differently: why did she exit the market labor force?) How is she insured, and do any of her policies have surrender values? What is the outstanding mortgage on her HDB leasehold, if any?

 

[yoongf]

Perhaps can arrange for her to open a CPFIS acct asap. Due to current crisis, there may be value buys popping up. Just standby the facilities first.

HDB flat depreciation is not excessive unless its closer to 40 yrs old.

Does mom hv an opinion abt her finances?

 

[qhong61]

Perhaps can arrange for her to open a CPFIS acct asap. Due to current crisis, there may be value buys popping up. Just standby the facilities first.

HDB flat depreciation is not excessive unless its closer to 40 yrs old.

Does mom hv an opinion abt her finances?

Do not insist she sell if unwilling. Rental income not too bad too. Nothing is like having ur own roof. Even a 2rm resale is also not bad. Staying with u permanently should be a last option unless u have no plan to marry.

 

[NewInvestor]

TS, my view is never sell a HDB flat. It is far more valuable as an asset to generate rental yields. Some HDB flats get 5% gross yield. That HDB flat will generate that rental yield for the rest of her life.

 

[item2sell]

TS, my view is never sell a HDB flat. It is far more valuable as an asset to generate rental yields. Some HDB flats get 5% gross yield. That HDB flat will generate that rental yield for the rest of her life.

Yeah. The rental provides more than what CPF gives you in comparison.

Left 80years. One room conservatively $700. Can get $672000.
And no income tax since your mom not working

Deduct agent commission yearly 40x700 = 28000.

Say 5% empty period. You get back $610k

 

[SBC]

Dun think is a good idea.

Do you have a place to stay?

Will suggest to buy a newer HDB 4-room.
Continue to rent out 1 room for rental income.

 

[ocs_woodlands]

Dear all

Here to seek some ideas or opinions for mum's financial planning. She's turning 50 soon and not working anymore. She would like to have a stream of income to supplement her living expenses (I am her sole provider).
Mum has been renting out her 20yr old 4bedroom HDB flat for couple of years (she lives with me).
The rental money served as extra pocket money for her.
I have been hearing about HDB flat depreciating in value rapidly after 30 years.
Is it a good idea to sell the 20 year old flat now and reinvest the proceeds?

TS, I am not sure what's your intention of starting this thread cos there are a few weird details that make me feel sceptical that your story is a real deal....

firstly the minor one...
4 bedroom HDB? Hardly ANYONE in SG describes.HDB flats using bedroom. a 4 room HDB only has 3 bedrooms. 5I, 5A & EA flats have 4 bedrooms

Next, the more major one..
your mum is turning 50... that makes you pretty young. certainly not 35 yo when you can get an HDB by yourself... OK pte property. 2 bidders in SG are at least 600k if not 800k..if you graduate at 25 (male +NS)you are at MAX (provided your mum had you when she was 20) only 30yo. and yet you describe that she has been renting out her HDB a few years??

something is not right...

 

[NewInvestor]

TS, I am not sure what's your intention of starting this thread cos there are a few weird details that make me feel sceptical that your story is a real deal....

firstly the minor one...
4 bedroom HDB? Hardly ANYONE in SG describes.HDB flats using bedroom. a 4 room HDB only has 3 bedrooms. 5I, 5A & EA flats have 4 bedrooms

Next, the more major one..
your mum is turning 50... that makes you pretty young. certainly not 35 yo when you can get an HDB by yourself... OK pte property. 2 bidders in SG are at least 600k if not 800k..if you graduate at 25 (male +NS)you are at MAX (provided your mum had you when she was 20) only 30yo. and yet you describe that she has been renting out her HDB a few years??

something is not right...

Bro, that is excellent CIS

 

[tangent314]

One thing to consider:

If your mom sells the flat before the age of 55, and does the CPF SA shielding, she will be pretty much guaranteed 4% interest for the rest of her life. Unlike rental yields, this 4% comes with no agent fees, no tax, no service and conservation charges, no worries about errant tenants, no pre-handover cleaning fee, does not stop in between tenants, no aircon maintenance.

If your rental yield is really good, then it may be worth all the hassle of renting the flat out, but if it's less than a bit more than 4%, then maybe not worth it.

This doesn't take into account appreciation or depreciation of the flat value, of course.

 

[Okenba]

TS, I am not sure what's your intention of starting this thread cos there are a few weird details that make me feel sceptical that your story is a real deal....

firstly the minor one...
4 bedroom HDB? Hardly ANYONE in SG describes.HDB flats using bedroom. a 4 room HDB only has 3 bedrooms. 5I, 5A & EA flats have 4 bedrooms

Next, the more major one..
your mum is turning 50... that makes you pretty young. certainly not 35 yo when you can get an HDB by yourself... OK pte property. 2 bidders in SG are at least 600k if not 800k..if you graduate at 25 (male +NS)you are at MAX (provided your mum had you when she was 20) only 30yo. and yet you describe that she has been renting out her HDB a few years??

something is not right...

TS didn't say that he's not married did he? Why so suspicious?

 

[NewInvestor]

One thing to consider:

If your mom sells the flat before the age of 55, and does the CPF SA shielding, she will be pretty much guaranteed 4% interest for the rest of her life. Unlike rental yields, this 4% comes with no agent fees, no tax, no service and conservation charges, no worries about errant tenants, no pre-handover cleaning fee, does not stop in between tenants, no aircon maintenance.

If your rental yield is really good, then it may be worth all the hassle of renting the flat out, but if it's less than a bit more than 4%, then maybe not worth it.

This doesn't take into account appreciation or depreciation of the flat value, of course.

Good scheme to get 4%. But the entire $350K can't go into the SA, even with the max shielding. So about half of $350K gets 4%, the balance may get 2.5% or less.

 

[merlot6230]

Good scheme to get 4%. But the entire $350K can't go into the SA, even with the max shielding. So about half of $350K gets 4%, the balance may get 2.5% or less.

Ask her continue her rental as passive income until 55.

Sell away the hdb to buy flexi lease 40yr while the profit to CPF as 2.5% and balance to FD or high yield saving or endowment.

Cash is king and liquid assets is queen.

 

[tangent314]

Good scheme to get 4%. But the entire $350K can't go into the SA, even with the max shielding. So about half of $350K gets 4%, the balance may get 2.5% or less.

The rest is supposed to be pushed into RA, up to the ERS.

Typically you can put 5x BRS minus $40k into 4% interest accounts SA + RA, so about $475k by the time she reaches 55 in 5 years times, based on estimate FRS increasing by $5k per year.

 

[qhong61]

TS didn't say that he's not married did he? Why so suspicious?

He meant he's too young.

 

[Okenba]

He meant he's too young.

Possibly too young to be 35 and qualify for the singles scheme, but I don't think too young to be married and buy a simple BTO. *shrug*

 

[want2go]

Happy CNY...

Thanks for the responses.
I am living overseas and mum joined me a couple of years back (hence rented out her flat).

She heard stories about 30 yr old flat unable to sell and raised the question.
Plus, I am unsure if I want to return to Singapore and sorting out the flat after she's gone might be a chore. So, it is better to let go when the flat is not too old.

Agents told us that 30 yr old flat is very hard to sell and advised us to think about it.

Question is, what can substitute the rental income if she sell her flat now. Major part of the sale proceeds will go back to CPF, which she can't access (from what we understood)

 

[tangent314]

Question is, what can substitute the rental income if she sell her flat now. Major part of the sale proceeds will go back to CPF, which she can't access (from what we understood)

Ok, you need to understand a bit about what happens with the CPF money first. At age 55, the FRS amount is taken from your mother's CPF OA + SA accounts and moved into the Retirement Account. The FRS amount is projected to be ~$206k by the time she reaches the age of 55. Everything else remaining in the OA and SA accounts can be withdrawn as cash at will. At age 65, your mother can opt to begin CPF Life payouts, which will pay her a certain amount monthly for the rest of her life.

So the plan should typically be to survive on cash for the short period of time between now and age 55 when the RA is formed. After that, between the age of 55 and 65, you can live on drawing down from SA+OA accounts. It is possible to calculate the exact amount you can withdraw each month so that you don't run out before you reach 65. Of course, you can withdraw less than that if you like. At age 65, you can then apply to begin CPF Life payouts, and you are pretty much worry free for the rest of your life.

That's just the overview anyway. You can optimize even further by doing the SA shielding trick to ensure that after age 55 the money remaining outside of RA ends up in SA instead of a combination of OA + SA. You can choose to backload the withdrawals by transferring more money into the RA (up to the ERS amount), and/or delay the payouts until age 70.